Community Savings and Credit

Strategies that Work for the Poor

Section  4     Diana Mitlin

The community process – tools and clues

Using processes such as these Asian institutions at both the grassroots and the state have been supporting a range of community led savings and loan groups.

 In the case of the pavement dwellers and Mahila Milan in Bombay, small housing daily saving activities link people with a concrete hope for housing and start a process of working together to secure difficult elements such as land and infrastructure.  Daily saving was slow to catch on in Thailand as at the beginning, there was little recognition of its value.  As Box 2 describes, it is now much more widely accepted as the economic crisis proved its strength. 

 Box 2

The idea of daily saving first came from poor community federations in India and South Africa that have embraced daily saving on a national scale.   The community people were interested but the professionals at UCDO were skeptical.  Over the last two years, there has been a gradual shift towards promoting daily saving as a key part of the search for systems that support the poor.  Thai networks are now eager to do daily saving both to deal with repayment problems and because of what it offers to the larger process.  Why does it work?

 Daily saving as a means of dealing with the repayment crisis.  
If people are unable to make monthly loan repayments, it creates difficulties for the individual and for the group.  Daily savings and daily loan repayments can help to make repayments affordable.  People can see their debts shrinking day by day.  It also makes sense that people are encouraged to repay when they have money in their pockets.  If they earn a daily livelihood, then this means every day.

Daily saving as a means of reaching the poorest.  
Daily saving attracts the poorest and brings them into the process.  For those with no hope of another financial system, daily saving makes sense and it brings the poorest into the process.  It also sinks roots into the community with continuous financial transactions.  It changes the process itself as the better off lose interest because of the small money and daily task.  For those who can save 500 or 1000 Baht a month, 5 Baht a day is too much bother.

 Daily saving as a simple system that matches life.  
 If the savings process is weekly or monthly, it is hard for the poorest families that are dependent on informal incomes to play a part because they live from day to day.  The Thai version of daily saving is a compromise.  In most groups, people choose to save daily weekly or monthly depending on their earning pattern.  It is not so strict.  In some groups, daily savers form their own sub-groups.

Daily saving as a way of challenging old inequities.  Savings schemes can be stuck because of old leaders.  When UCDO started savings schemes there was a hope that the traditional leaders would be challenged and a more democratic leadership would evolve.  But the leaders clung tightly to power.  Daily saving has helped small groups to emerge in a way that did not directly challenge the leadership immediately.  When the challenge comes, these new groups come together and find they are strong enough to create a new power structure within communities.

 

Community development begins with a process of self-survey in the community and continues through the search for vacant public land for housing.  The first Mahila Milan group in Byculla encountered many experiences and learning in negotiating with concerned agencies for land for so many years before getting public land at desirable location selected by the group.  Groups that are negotiating for land also work on house models to design, trial and then demonstrate what it is that they want to do.  Each land development requires infrastructure installation and the community groups develop options that include communal toilets and sewage systems.  The process and achievement in Thailand among UCDO groups have given a great impact to other urban poor groups to follow the same examples.  Some of these concrete examples can lead to policy change if they are seen to be proposing new alternatives that are clearly better, cheaper and more affordable than current practice.

 UCDO has been lending for housing since 1993.  During this period, there has been regular consideration on how lending for housing development can assist the poor.  In the case of UCDO, after the first three or four years of giving loans for housing, it was found that subsidised interest rates alone are not sufficient enable the poorest families to be included in the process as incomes are too low relative to market prices.  A community-based reflection/evaluation in 1997 provided some interesting insights into how housing for the urban poor by community groups might be better managed.

 Community groups who face eviction should not just accept eviction and take loans for relocation projects to buy land and develop house.  They need time to better prepare savings schemes and plan an incremental housing process.  At the same time they should seek to negotiate with landlords to both delay eviction and to obtain compensation from the landlord to pay fully or partially for the new land.  If communities work together to negotiate with landlords and slow down eviction and/or find concerned public agencies willing to help them find alternatives, they will be stronger.   Such activities create a better spirit in the group and it is easier to develop the self-determined housing process through managing housing loans.

 Regarding finance, housing projects should be affordable so that all members, even the poorest, can be included in the new housing project as much as possible.  As noted above, in the new housing process, each community member needs to participate in each housing development steps including the search for land, price of land related, community planning, infrastructure development, housing construction and coordination with organizations concerned. 

 The housing project should be small and simple if it is to be successfully managed by the community.  In this reflection, it was suggest that the size should be not more than 4 acres.

 Those experiences have brought changes to the present UCDO housing process in which housing and community networks are now increasing planning in collaboration with other local groups.  In this new process, community networks organize community surveys and collaborate with groups in the same district to find ways for planning the housing development for all communities.  The network also brings in other parties in the district such as local government to these discussions.  In this way, communities obtain a stronger bargaining power with concerned agencies.  Networks are proposing packages in which some communities obtain infrastructure improvement, others opt for land sharing, and some for relocation within the district.  Available government land in the district can be identified in order to obtain public land for urban poor housing.  For UCDO, housing loans can be offered to the network for all the housing development projects in the same district.  These loans can be managed by the community network together with the local organizations. 


 

Next      5. The Asian Crisis as an Opportunity

     Introduction
     Why Savings and Loans  
     Credit for Housing   
    The community process  tools and clues  you are here
     The Asian Crisis as an Opportunity  
    Conclusion   

This article is written by
DIANA  MITLIN
in collaboration with many of the Savings schemes in Slum Dwellers International and ACHR.
The final article is forthcoming in the journal
Environment and Urbanization  Vol. 13.2
available from IIED UK
The whole issue is on SDI and ACHR